Are we seeing the establishment of an American empire?

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Globalization is a process by which the whole world becomes free to movement of people, goods, services, labour, technology and capital thereby increasing the connectivity and interdependence among countries in terms of markets and businesses. In this context therefore, globalization is a complex relationship that has far-reaching effects in the world over with varying effects in different regions of the world. This interdependency and connectivity however has been speeded up by the increase in technological advances which has grown tremendously in the last two decades. With the increased freeness in the world economies, trading opportunities are increased for every country although competition is also increased globally which is intended to be fair a cross the whole globe. This is intended to ensure equal opportunities for every country in world all over. This has therefore led to the rise of pro-globalization lobby organizations including the World Trade Organization and World Economic Forum who argues that globalization brings about much increased opportunities for almost everyone and increased competition is a good thing since it makes agents of production more efficient (http://www.investorwords.com/2182/globalization.html).

However, due to the effects that globalization has had in different regions of the world. It has continued to draw many views and perceptions and therefore become a hotly contested issue in current political discourse. At some points, globalization has been seen to be irresistible and an important force for delivering economic prosperity to people throughout the world. While at the same time, it has been blamed as a source of all contemporary ills.

It is believed however that the key characteristics of globalization have been the liberalization of international trade, the expansion of Foreign Direct Investment and the massive cross border financial flows. All these have resulted in increased competition in the global markets as expected. However this has not been only possible through liberalization but also through the combined effects of policy decisions aimed at reducing national barriers to international economic transactions and the impact of new technology, especially in the sphere of information and communication. These new developments in the field of information and communication technology have really accelerated the current process of globalization as compared to the past. In particular, the effects of new technology have given a distinctive character to the current process of globalization as compared to the similar episodes in the past. For instance, the current episode of globalization has seen a drastic fall in the cost of moving goods, information, people and capital across the globe. Similarly the natural barriers of time and space in the process have also vastly reduced. Although global communication is cheap and instantaneous and is still becoming low as time goes by, it has assisted quite significantly by expanding the feasibility of economic transactions across the world. Overally, the markets are now global in scope which is achieved by expanding the range of goods and services. Similarly, in the current episodes of globalization unlike earlier episodes which was characterized by massive cross-border movements of people, the current process largely excludes this. In the current episode where goods, firms and money are allowed to move freely while criss-crossing borders, people are not allowed to do so.“ Current globalization is therefore characterized by various trends in different countries with respect to world trade, Foreign Direct Investment (FDI), financial flows and technologies, which are mainly controlled by the three main economic institutions in the world that is World Bank, World Trade Organization and International Monetary Fund” (http://www.ilo.org/public/english/wcsdg/docs/rep2.pdf).

Origin of the three institutions

“Towards the end of the Second World War, in July 1944, representatives of the U S, Great Britain, France, Russia and 40 other countries met at Bretton Woods, a resort in New Hampshire, to lay the foundation for the post-warinternational financial order. With such a new system, they hoped, would prevent another worldwide economic cataclysm likethe great depression that had destabilized Europe and the United States in the 1930s and had contributed to the rise ofFascism and the war. Therefore, the United Nations Monetary and Financial Conference, as the Bretton Woods conference was officially called, created the International Monetary Fund (the IMF) and the World Bank to prevent economic crises and to rebuild economies shattered by the war. At the time of Bretton Woods, there was serious concern about the stability of global economic markets. The world wide depression of 1930s had been deepened by the instability of the international currency markets and the contraction of international trade, so that stabilization of those markets and promotion of trade were considered crucial to avoid another crisis. Likewise, the destruction of Europe and uncertainty about its future also threatened to cause economic and political disruption. The countries allied to fight Nazi Germany Japan believed that a similar collaborative support was the only way to stabilize their economies and those of their soon to be defeated enemies and to provide funds to rejuvenate the countries destroyed by war. Although intended to benefit the economy and contribute world to world peace, the World Bank and IMF, collectively referred to as international financial institutions, have become primary targets of the anti- globalization movement. And in many countries it is viewed as imposing western style capitalism on developing countries without regard to social effects” .

The World Trade Organization however came into existence in 1995. In specific, among its objectives include: to operate a system of trade rules; it also serves as a place for nations all over the world to settle disputes while at the same time negotiate agreements to reduce trade barriers. However, like the other two international financial institutions. The World Trade Organization draws its roots to the World War Two and the years that followed. Although the negotiators agreed to create the International Monetary Fund and the World Bank at the the Bretton Woods, New Hampshire 1944, the International Monetary Conference. They could not agree on an organization to deal with international trade hence led to its formation after wards.

However critics of these institutions have been vocal and have always pointed out their effects towards achieving a global world. They have been viewed to favour certain countries, mostly developed world in particular US thereby undermining the reasons and objectives that led to their formation. “Since globalization started, World trade has expanded rapidly over the past two decades. Since 1986, it has consistently grown significantly faster than world gross domestic product (GDP). Throughout the 1970s, trade liberalization within the framework of the General Agreement on Tariffs and Trade (GATT) was modest and gradual, and involved the industrialized countries much more than it did the developing ones. However, from the early 1980s onwards, the extent of trade liberalization, especially in the developing countries, began to accelerate. This trade expansion did not occur uniformly across all countries, with the industrialized countries and a group of 12 developing countries accounting for the lion’s share. In contrast, the majority of developing countries did not experience significant trade expansion. Indeed, most of the Least-Developed Countries (LDCs), a group that includes most of the countries in sub-Saharan Africa, experienced a proportional decline in their share of world markets. Despite the fact that many of these countries had implemented trade liberalization measures. During the early 1980s, FDI accelerated, both absolutely and as a percentage of GDP. Since 1980, the policy environment worldwide has been far more conducive to the growth of FDI. Over the 1990s, the number of countries adopting significant liberalization measures towards FDI increased steadily. Indeed, there are only a few countries that do not actively seek to attract FDI. However, many of these hopes have not been fulfilled. Despite the rapid growth of FDI flows to developing countries, investment remains highly concentrated in about ten of these countries with the US in leadership. Similarly the combined and interactive impacts of globalization in trade, FDI, finance and technology has had a profound and varying impact in different economic sectors, types of enterprises, categories of workers and social groups” (http://www.ilo.org/public/english/wcsdg/docs/rep2.pdf).

Global economic institutions like World Bank, IMF, WTO, federal reserve, central banks and states of the major industrial countries always work together to create the conditions for the expansion of speculative capital. In particular the interests of an emerging global ruling class are always served and protected by these national and international state institutions through a global system dominated militarily and politically by the U.S., as well as by U.S. domination of the global financial system through dollar hegemony.

The dominance of the world’s financial system by the U.S. has grown quantitatively since the end of World War II, and through this it has been able to qualitatively set the conditions for the new world financial system of today. “The U.S. has dominated global finance since the end of World War II, when the major industrial powers established the institutions of global capital that is the United Nations, GATT (precursor to WTO), the International Monetary Fund and World Bank. The Bretton Woods agreements (1944-1945) established a system of fixed exchange rates with the dollar pegged to gold at $35 an ounce that secured U.S. financial dominance in line with its political and military dominance. Dollars became the reserve currency for the capitalist world. As the U.S. became a debtor country with its military spending far exceeding its exports, the growth of the world’s monetary reserves came to depend on the foreign dollar balances created by the U.S. trade deficit. In 1971, when international creditors lost confidence in the dollar and demanded payment for their dollars in gold, the U.S. defaulted on its payments, thus severing the link between gold and the dollar. During the 1973 Middle East crisis, the U.S. forced the oil-producing nations to denominate the sale of oil in dollars. This meant that other countries had to acquire sufficient quantities of dollars in order to purchase essential supplies of oil. The “petrodollars” accumulating in the hands of the oil producing countries were returned to the U.S. as investments, thus financing the U.S. deficit. Enabled by the international institutions of global finance, U.S. domination of the oil market and dollar hegemony, in a symbiotic relationship, have grown in significance over the years. The WTO imposes draconian free-market rules on everything except oil and currencies, and the IMF acts as the world’s policeman in defence of dollar hegemony. Since the advent of electronic technology and the rise of globalization, U.S. dominance of global finance has entered a qualitatively new stage. The federal government bailed out the Savings and Loan companies (1989) and Chrysler Corporation (1979) because their failure could have caused financial crisis and even depression” (Hudson, 2003).

Similarly, today the US has continued to use similar tactics as above. Any signs of faltering in their economy or sharp changes in the value of dollar have always been met with rapid and decisive actions by the IMF and central banks of Europe and Asia just to protect the dollar and the U.S. economy. Since they have an overwhelming control over the world major financial agencies that is the World Bank, IMF and WTO, and the fact that all the institution’s headquarters are located in the U.S. They have always been seen to be serving their interests. Therefore to do otherwise would put the economy of US and possibly the entire world, at a risk of financial crisis and depression. For instance, “treasury has run up an international debt of over $600 billion, using the balance-of-payments deficit to finance not only its widening trade deficit but its federal budget deficit as well. To the extent that these Treasury IOUs are being built into the world’s monetary base they will not have to be repaid, but are to be rolled over indefinitely. This feature is the essence of America’s free financial ride, a tax imposed at the entire globe’s expense” (Hudson, 2003). Contrary to the rhetoric of market fundamentalism and free trade that it imposes on the rest of the world, the U.S. economy would be in its death throes if it had to live by the rules of the market and free trade (Hudson, 2003).

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